BILL ANALYSIS HB 1503 By: Yarbrough April 7, 1995 Committee Report (unamended) BACKGROUND The City of Houston Municipal Employees' Pension System is governed by Article 6243 (g), V.T.C.S. This article applies at present only to the City of Houston. The Pension System is governed by a Board of Directors (Pension Board). The Board and the System are charged with administering a two-track pension system, referred to in the statute as Group A and Group B. The Board has sole responsibility for its actions as set out in §§ 5 (a) and (h) and § 20 of Article 6243(g) at present. PURPOSE This bill tightens and clarifies language regarding the responsibilities of the Board in governing the System, resolves any potential conflict in statutory language, and increases the Board members' responsibility for their actions. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1: Amends Chapter 358, Article 6243g, V.T.C.S., by adding Sections 3A and 3B as follows: Sec. 3A. (a) Describes who is eligible to participate in Pension System and make election to become Group A or Group B member. Prescribes submission of a signed notarized form to become a Group A member and contribute a portion of salary to the Pension Fund per this Act. Describes Group B member which makes no contributions to Pension Fund. (b) Establishes a date certain for the beginning of elections under this section. Sec. 3B. (a) Provides that each member whether an employee or elected official of a city shall make a one-time irrevocable election on a date determined by the Pension Board. Provides for system beneficiaries to retain their membership in Group A or Group B. Refunds of contributions by Group A members moving into Group B are made without interest. Stipulates that membership changes from Group B to Group A, must comply with Subsection (b). (b) Provides that payments By Group B members opting into Group A are required to be made with interest at the legal rate. (c) Requires Pension Board to prepare and distribute a brochure to explain the election and benefit alternatives. Provide adequate information for an informed choice. Designate one or more to provide additional information. (d) Prescribes form to be used for the election and must be notarized. Includes a form indicating the member has read and understands the election process. (e) Election cannot be before January 1, 1996. SECTION 2: Amends Sections 5 (a) and (h), Chapter 358, Article 6243g. V.T.C.S., as follows: 5(a) Grants Pension Board the right to receive, handle, control, manage, and disburse Pension Funds for the respective city. 5(h) Grants Pension Board the authority to adopt for administration purposes written rules and guidelines consistent with this Act. Provides for Pension Board to administer this Act for the benefit of all members. Requires Pension Board to establish and maintain all records for proper administration. SECTION 3: Deletes obsolete language in Section 6, Chapter 358, Article 6243g, V.T.C.S. SECTION 4: Amends Section 23(b), Chapter 358, Article 6243g, V.T.C.S., by authorizing the equalization of non-contributory Group B pension options by revamping the retirement age by service credit on a sliding scale to more equitably reflect the relationship between service, age and benefits. SECTION 5: Amends Chapter 358, Article 6243g, V.T.C.S., by adding Section 31A, which grants the system and its beneficiaries wider latitude in the payment of lump sum valued benefits when, for example, a beneficiary requires such payment for catastrophic medical bills. SECTION 6: Repeals Section 23 (d) and 24 (b), Chapter 358, Article 6243g, V.T.C.S. SECTION 7: Effective date SECTION 8: Emergency clause SUMMARY OF COMMITTEE ACTION HB 1503 was considered by the committee in a public hearing on held on April 3, 1995. Rep. Ken Yarbrough testified as the bill's author. The following person testified for the bill: Jack Ogg representing the Houston Municipal Employees Pension System The bill was reported favorably without amendment with the recommendation that it do pass and be printed and sent to the Committee on Local & Consent Calendars by a record vote of 5 ayes, 0 nays, 0 pnv & 4 absent. Pensions & Investments Committee